Sustainability Solutions | Anitech

AASB S1 and AASB S2 Explained: Australia’s New Sustainability Reporting Standards

AASB S1 and AASB S2 Explained: Australia’s New Sustainability Reporting Standards

Australia’s mandatory sustainability reporting framework has arrived. In 2024, the Australian Accounting Standards Board (AASB) finalised two critical standards that will fundamentally reshape how Australian organisations disclose environmental, social and governance information: AASB S1 and AASB S2. For CFOs, finance teams, company secretaries, and sustainability managers at ASX-listed companies and large reporting entities, understanding these standards is now essential.

This article provides a comprehensive guide to both standards, their requirements, compliance timelines, and what they mean for your organisation. As part of Australia’s broader sustainability reporting regulatory landscape, these standards represent the country’s commitment to harmonising with international sustainability disclosure frameworks while addressing local business needs.

For a complete overview of ESG strategy in Australia, see our complete ESG guide.

What Are AASB S1 and AASB S2?

AASB S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and AASB S2 (Climate-related Disclosures) are Australian sustainability accounting standards developed by the Australian Accounting Standards Board. They are based on the International Sustainability Standards Board (ISSB) standards IFRS S1 and IFRS S2 but adapted for the Australian regulatory environment and reporting context.

These standards replace voluntary sustainability reporting frameworks and create a mandatory disclosure regime for certain Australian entities. They represent the culmination of years of consultation, including Treasury’s 2023–2024 sustainability reporting consultation process, and are underpinned by amendments to the Corporations Act 2001 (Cth).

Understanding AASB S1: General Requirements for Disclosure

Core Principles of AASB S1

AASB S1 establishes the foundational framework for sustainability-related financial information disclosure. The standard defines “sustainability-related financial information” as information about how an entity’s exposure to sustainability-related risks and opportunities affects its financial performance, position, and prospects.

Key principles underpinning AASB S1 include:

  • Materiality: Entities must disclose information that is material to investors and other stakeholders. AASB S1 defines materiality in the context of sustainability-related financial information as information for which there is a reasonable possibility that its omission, misstatement, or obscuring could influence decisions of the primary users of general-purpose financial reports.
  • Completeness: Disclosures must provide a complete picture of sustainability-related risks and opportunities without omissions that could mislead.
  • Accuracy: Information must be accurate and free from bias, using data that has been verified where possible.
  • Neutrality: Disclosures should present a balanced view, avoiding selective presentation that favours particular outcomes.
  • Timeliness: Information must be disclosed within timeframes that allow users to make informed decisions.

Governance Requirements Under AASB S1

AASB S1 requires organisations to disclose detailed governance arrangements for sustainability-related risks and opportunities. This includes:

  • Board oversight of sustainability matters and the skills, experience, and knowledge board members bring to these issues
  • Management’s role in assessing, managing, and monitoring sustainability-related risks and opportunities
  • Reporting lines and accountability structures for sustainability governance
  • Board committee structures and their responsibilities for sustainability
  • How remuneration is linked to sustainability performance

For ASX-listed companies, these disclosures must align with ASX Listing Rules and Australian Securities and Investments Commission (ASIC) expectations regarding board composition and governance.

Strategy and Business Model Disclosure

AASB S1 requires organisations to disclose how sustainability-related risks and opportunities are integrated into their business strategy and business model. Entities must explain:

  • How sustainability factors influence the entity’s current business model
  • How these factors are likely to affect the business model in the future
  • The effect of the strategy on the entity’s financial performance, position, and prospects
  • Where applicable, transition strategies (for example, in response to climate change)

Risk and Opportunity Management

AASB S1 requires disclosure of the processes by which entities identify, assess, and manage sustainability-related risks and opportunities. This includes:

  • How material sustainability risks and opportunities are identified
  • Assessment methodologies and metrics used
  • How prioritisation and integration into risk management systems occurs
  • Resources and accountability for management processes

Understanding AASB S2: Climate-related Disclosures

The AASB S2 Framework

AASB S2 (Climate-related Disclosures) is a sector-specific standard that applies the AASB S1 framework to climate-related information. It aligns closely with the Task Force on Climate-related Financial Disclosures (TCFD) framework and the ISSB’s IFRS S2, ensuring consistency with international practice.

AASB S2 requires organisations to disclose information about climate-related risks and opportunities using the four pillars established by the TCFD:

  • Governance: Board and management oversight of climate matters
  • Strategy: How climate risks and opportunities affect business strategy
  • Risk Management: Identification, assessment, and management of climate risks
  • Metrics and Targets: Climate-related metrics, including greenhouse gas emissions, and climate-related targets

Greenhouse Gas Emissions Disclosure

AASB S2 requires mandatory disclosure of Scope 1 and Scope 2 greenhouse gas emissions in tonnes of carbon dioxide equivalent (tCO₂e). The standard defines:

  • Scope 1 emissions: Direct emissions from sources the entity owns or controls
  • Scope 2 emissions: Indirect emissions from purchased electricity, steam, heat, or cooling
  • Scope 3 emissions: All other indirect emissions in the entity’s value chain (where material)

Entities must use internationally recognised methodologies for quantifying emissions and should disclose both absolute emissions and intensity metrics (for example, emissions per unit of revenue or per employee).

Climate Scenario Analysis and Transition Risk

AASB S2 requires entities to disclose climate scenario analysis, including how climate-related risks and opportunities are likely to affect the entity under different climate scenarios (for example, scenarios limiting warming to 1.5°C or 2°C). This includes disclosure of:

  • Transition risks arising from policy, legal, technology, and market shifts towards a low-carbon economy
  • Physical risks from climate change impacts (acute and chronic)
  • Resilience of the strategy to identified climate scenarios

Climate Targets and Commitments

Where an entity has made climate-related commitments, AASB S2 requires disclosure of:

  • The target(s) and timeframe(s)
  • The baseline year and methodology
  • Progress towards targets
  • Interim milestones where applicable
  • Governance and accountability for achieving targets

Mandatory Reporting Phased Rollout

Group 1: Large Reporting Entities (FY2025–26)

Group 1 entities must comply with AASB S1 and AASB S2 for financial years commencing on or after 1 January 2025. This means the first mandatory sustainability reports will be published in 2026. Group 1 includes:

  • ASX-listed entities
  • Large proprietary and public companies (consolidated revenue ≥ $500 million or consolidated assets ≥ $250 million)
  • Large registered schemes
  • National Greenhouse and Energy Reporting (NGER) reporters

Group 2: Mid-Size Reporting Entities (FY2026–27)

Group 2 entities must comply for financial years commencing on or after 1 January 2026, with first reports due in 2027. Group 2 includes:

  • Medium proprietary and public companies (consolidated revenue ≥ $200 million or consolidated assets ≥ $100 million)
  • Medium registered schemes

Group 3: Smaller Reporting Entities (FY2027–28)

Group 3 entities must comply for financial years commencing on or after 1 January 2027, with first reports due in 2028. Group 3 includes:

  • Smaller proprietary and public companies
  • Smaller registered schemes

Key Implementation Considerations

Materiality Assessment

Before beginning sustainability reporting, organisations must conduct a comprehensive materiality assessment to identify which sustainability-related risks and opportunities are material to their business. This is a critical first step that shapes your entire disclosure strategy.

Data Governance and Management

AASB S1 and S2 require robust data governance frameworks to ensure the accuracy and reliability of disclosed information. Organisations must establish processes for collecting, validating, and verifying sustainability data across operations and, where applicable, supply chains.

External Assurance Requirements

AASB S1 requires that sustainability information be subject to limited external assurance. Large entities (Group 1) reporting under these standards must obtain limited assurance from an external assurance provider against APES 3000 (Assurance Engagements on Sustainability Information).

Integration with Financial Reporting

While sustainability information can be reported separately or as part of the annual report, AASB S1 and S2 information must be clearly connected to financial reporting. Where sustainability matters affect financial outcomes (for example, through asset impairment), this must be reflected in both sustainability and financial disclosures.

Links to Other Standards

AASB S1 and S2 sit within a broader ecosystem of sustainability reporting frameworks. Many Australian organisations voluntarily report against GRI standards and participate in CDP disclosures. Understanding how these frameworks interact with mandatory AASB reporting is essential for efficient, integrated reporting.

For a detailed comparison of reporting frameworks, see our guide on ESG reporting frameworks.

Frequently Asked Questions

Who is required to report under AASB S1 and AASB S2?

Entities in Group 1 (large reporting entities, including ASX-listed companies) must comply from FY2025–26. Group 2 (medium entities) comply from FY2026–27, and Group 3 (smaller entities) from FY2027–28. Some entities may be exempt or may have earlier compliance dates based on specific circumstances.

Can we provide qualitative disclosures instead of quantitative metrics?

While AASB S1 and S2 require quantitative information where possible (particularly for greenhouse gas emissions under AASB S2), qualitative disclosures are permitted where quantitative data is not available or not material. However, the explanation for why quantitative data is not provided must be clear and substantiated.

How does AASB S2 relate to the TCFD framework?

AASB S2 is aligned with the TCFD framework and uses the same four pillars (Governance, Strategy, Risk Management, Metrics & Targets). However, AASB S2 is more prescriptive and includes specific metrics and disclosure requirements not detailed in TCFD.

What happens if we cannot obtain external assurance immediately?

AASB S1 requires limited assurance. If an assurance provider cannot be engaged immediately, entities should disclose this and explain the steps being taken to obtain assurance. However, delaying compliance is not an acceptable reason for non-engagement.

Does AASB S1/S2 replace voluntary sustainability reporting?

Mandatory reporting does not replace voluntary frameworks such as GRI. Many organisations will continue to report against both AASB standards and voluntary frameworks to meet diverse stakeholder needs and market expectations.

How should we handle Scope 3 emissions disclosure?

AASB S2 requires Scope 3 emissions disclosure where material. Materiality is assessed using both quantitative and qualitative factors. If Scope 3 is material, disclosure must include methodology, boundaries, and assurance. If not material, entities must explain their materiality assessment.

Moving Forward with AASB S1 and S2

Compliance with AASB S1 and AASB S2 represents a significant governance and operational undertaking. Organisations should begin preparing immediately by establishing governance frameworks, conducting materiality assessments, implementing data management systems, and identifying external assurance providers. The transition to mandatory reporting is not a compliance checkbox but an opportunity to embed sustainability into organisational strategy and decision-making.

Ready to develop your AASB S1 and S2 compliance strategy? Book a Free ESG Strategy Session with our sustainability reporting experts to assess your current position and plan your implementation roadmap.